Fundamental Analysis, also known as Fundamental Analysis in English, is a method of evaluating a company's value. It analyzes the company's fundamentals based on the company's financial data, operating model, industry and overall economic environment to determine the company's intrinsic value (Intrinsic Value) and compare it with the current company's stock price to provide investors with appropriate investment advice. Fundamental analysis is an important basis for value investing. For example, when the company's intrinsic value is higher than the company's stock price, the stock price is undervalued and you can buy it. On the contrary, if the company's intrinsic value is lower than the current stock price, the stock price is overvalued and you should sell it. When analyzing a company's fundamentals, you often need to analyze the company's financial statements, management discussion and analysis reports, industry research, competitor analysis, market trends, etc. Fundamental analysis is widely used in investment decisions, especially value investing. Therefore, the company's fundamental analysis needs to combine a variety of data, and it requires professionals to go through a long period of study before they can accurately find the required data from the financial statements, and analyze and summarize the macroeconomic environment to arrive at the most reasonable analysis results for the target company. When conducting a company's fundamental analysis, you can use a bottom-up or top-down approach, combining qualitative analysis and quantitative analysis to give a fairer analysis result. In particular, TradeUP Securities (the American brand of Tiger Brokers) provides detailed financial data of listed companies, as well as news about individual stocks and the entire macro economy, accurately grasping the fundamentals and assisting your investment. Currently, when you open an account at TradeUP, you can get a chance to draw free US stocks, and you may get up to $1570 in US stocks. You can read the article "Detailed Explanation of TradeUP Securities Account Opening" to learn about the latest account opening bonus information. This article does not constitute any investment advice. Remember, the stock market is risky and investment needs to be cautious. Macro factors refer to factors that affect the entire economic environment, such as national policies, macroeconomic environment, market trends, etc. These factors may affect the company's business environment and future development, so when conducting fundamental analysis, it is necessary to consider the impact of macroeconomic factors on the company. Micro factors refer to factors that affect the company's internal operations and performance, such as the company's financial status, business strategy, market share, product competitiveness, etc. These factors can be evaluated through methods such as financial analysis, industry analysis, and competitor analysis. When conducting fundamental analysis, you need to have a sufficient understanding of accounting, finance, and economics to accurately assess the current overall economic environment and industry development trends, and when conducting micro analysis, you need to quickly find the required data from the financial reports released by the company. Therefore, when conducting fundamental analysis of a company, you need to: Economic Analysis Industry Analysis Company Analysis Economic Analysis Economic analysis is a very important part when conducting fundamental analysis because the macroeconomic environment has a great impact on a company's business and profitability. Economic analysis includes: GDP growth rate: Gross domestic product (GDP) is a measure of a country's total economic activity. GDP growth rate reflects the growth rate of a country's economic activity. The industry in which a company operates is typically affected by GDP growth rates. Inflation rate: The inflation rate reflects the rate of change in the price level. When the inflation rate increases, the purchasing power of money decreases, and the company's costs may increase. Unemployment rate: Unemployment rate refers to the proportion of unemployed people in the labor market to the total labor force. The level of unemployment rate may affect consumer purchasing power and company sales revenue. Interest rates: Interest rates are the cost of borrowing capital, and companies may be affected by changes in interest rates, especially companies that need to borrow for investment or capital expenditures. Exchange rate: Exchange rate is the ratio of one currency to another. If a company is involved in international trade, fluctuations in exchange rates may affect its profitability. Through the analysis of the macroeconomic environment, fundamental analysis can more comprehensively evaluate the company's intrinsic value and future development potential.
Industry analysis of fundamental analysis refers to the analysis and research of the industry in which the company operates to understand the current status, trends and competitive environment of the industry, as well as to evaluate the company's competitiveness and future development potential in the industry. Industry analysis includes: Industry market size: Industry market size refers to the sales revenue and market share of the entire industry. By understanding the industry market size, the competitive environment and market potential of the industry can be determined. Industry growth rate: Industry growth rate refers to the annual sales revenue growth rate of the industry. Understanding the industry growth rate can predict the future development trend of the industry. Industry structure: The industry structure includes the main players in the industry, the supply chain and value chain of the industry, the main products and services in the industry, etc. By understanding the industry structure, you can understand a company's competitors, suppliers, customers, etc. Industry trends: Understanding the future development trends of the industry, such as technological innovation, regulatory changes, changes in consumer demand, etc., can help evaluate the company's future development potential in the industry. Competitor analysis: Understand the company's competitors, including competitors' market share, business strategies and financial status, etc., so as to evaluate the company's competitiveness in the industry. Through the analysis of the industry, we can better understand the company's business environment and competitive environment to evaluate the company's intrinsic value and future development potential. Company analysis of fundamental analysis refers to the analysis and research of the company's own financial status, business strategies and future development to evaluate the company's intrinsic value and future development potential. When conducting company analysis, financial data is used to calculate a variety of financial ratios, such as the following: Earnings Per Share (EPS): This is one of the most commonly used financial ratios and can be calculated by dividing a company's net income by the number of shares outstanding. EPS tells analysts how much of a company's operating profit is allocated to each share of stock. Price-to-Earnings Ratio (P/E Ratio): Also one of the most commonly used financial ratios, it is calculated by dividing a company's actual stock price by its earnings per share. Generally speaking, if the P/E ratio is greater than 1, it means that the actual stock price is greater than the earnings per share, which will lead to an evaluation result that the stock price is overvalued. On the contrary, if the P/E ratio is less than 1, it means that the earnings per share is greater than the actual stock price, that is, the stock price is undervalued. Price-to-Sales Ratio (P/S Ratio): The price-to-sales ratio is calculated by dividing a company's total market capitalization by its sales. It is sometimes called a sales multiple. The higher the price-to-sales ratio, it means that the company's current market value is relatively high relative to sales revenue, which means that the stock price is high and it is not a good time to invest. On the contrary, the lower the price-to-sales ratio, it means that the company's current market value is low relative to sales, and it has good room for growth, which is a good time to buy and invest. Price-to-Book Ratio (P/B): The price-to-book ratio is calculated by dividing the company's market capitalization by its book value, where the market capitalization is obtained by multiplying the stock price by the number of outstanding shares. The book value is the value obtained by subtracting the total assets of the company in the financial statement from the total liabilities and subtracting the preferred stock equity. The calculation significance of the price-to-book ratio is to evaluate the relationship between the company's current stock price and the company's book value. The higher the price-to-book ratio value, the higher the stock price relative to the book value, and the lower the investment value. On the contrary, the lower the price-to-book ratio value, the lower the stock price relative to the book value, and the higher the investment value. Dividend Payout Ratio: Also known as the dividend distribution ratio, it is a percentage value that compares the dividends paid by a company to its earnings. This number indicates how much of a company's earnings it distributes to shareholders as dividends. The lower the value, the less dividends shareholders receive from the company's earnings. On the contrary, the higher the value, the greater the return shareholders can get from the company's earnings.
Dividend Yield: This ratio is a percentage calculated by dividing a company's dividend per share by its stock price. The dividend yield value indicates the proportion of dividends that shareholders receive per unit of investment. The dividend yield combined with the capital gains rate earned from the stock price make up the total return an investor receives from their investment. A higher dividend yield indicates that the company's stock price is growing slowly, and most of the returns shareholders receive from their investment come from dividends rather than stock price increases. Return on Equity: This ratio is a percentage value obtained by dividing a company's net income by total shareholders' equity, and represents the company's ability to use shareholders' investments to earn profits. The higher the return on equity, the higher the company's ability to use equity to earn profits, and the more willing investors are to invest. Projected Earnings Growth: Projected Earnings Growth is when analysts use a specific calculation formula to calculate the target company's stock using different financial data to predict the earnings growth rate of the target company's stock in the future, usually one year. Investors will use this value to estimate their possible return on investment. When conducting specific fundamental analysis, we can follow two research directions: top-down or bottom-up. Top-down approach: In this approach, analysts start with macroeconomic analysis, such as interest rates, inflation rates, and GDP change rates, and then analyze the development level, prospects, and potential development opportunities of the company's industry. Finally, a specific micro-analysis of the company is conducted, including the calculation of various financial indicators. Conduct fundamental analysis from macro to micro. Bottom-up method: The bottom-up analysis method starts with the company's micro-data analysis, first calculates the company's various financial indicators, and combines the company's stock price to analyze the company's operating capabilities and the investment significance of the current stock price. Then start to study the company's positioning and development prospects in the industry, and finally analyze the company's development positioning in the current environment based on the overall economic environment. The bottom-up research direction focuses on the research and stock selection of individual stocks, and is more suitable for short-term trading or active investors; The top-down research direction focuses more on the research and analysis of macroeconomic and industry trends, and is suitable for long-term investors. In actual investment, the two research directions can also be used in combination to obtain a more comprehensive investment analysis. The difference between the two is as follows: The starting point of the research is different: the starting point of the bottom-up research direction is to analyze the financial and operating conditions of individual companies to find stocks with investment value; while the starting point of the top-down research direction is to analyze the economic, political and social conditions of the world, countries and regions to predict economic cycles and market trends. The research focus is different: the bottom-up research direction focuses on analyzing the company's own financial and operating conditions to predict its future development potential, and then select stocks with investment value; while the top-down research direction focuses on the research and analysis of the industry and macroeconomic environment to understand market trends and industry trends, and then select stocks with good performance. Risk control is different: bottom-up research directions usually focus more on the risk control of individual companies, such as assessing the company's financial stability and operating risks; while top-down research directions pay more attention to macro-environment and market risks, such as the impact of economic cycles, policy changes and other factors on the market. What are the methods of fundamental analysis? When analysts conduct fundamental analysis of a company, they mainly perform two types of analysis: Qualitative Analysis Quantitative Analysis Qualitative analysis of fundamental analysis refers to non-digital analysis of companies and industries, including the evaluation of the company's brand, product quality, market position, brand reputation and other factors. These factors are often difficult to quantify and require analysis based on experience, expertise and intuition. Qualitative analysis is based on the company's business model, competitive advantages, management status and corporate governance capabilities. Business Model: Mainly analyzes the company's operating purpose and whether the overall operating model can achieve sufficient profitability, etc.
Competitive Advantage: Based on the company's various industry advantages so far, it measures its competitive advantage in continuing to develop in the industry, and evaluates whether this competitive advantage can be maintained for a long time. Management: Analyze the company's leaders or management to assess whether they have the ability to continue to lead the company to healthy development, etc. Corporate Governance: Through the analysis of the company's internal structure, we can understand the responsibility relationship and collaboration status between various management levels, and discover whether the company can provide a transparent and easy-to-understand governance model to make it easier for investors to understand the company's operating status. Quantitative analysis is usually based on a company's financial data and statistical data, using mathematical and statistical models to perform calculations and predictions to evaluate the company's intrinsic value and future development potential. Quantitative analysis can include the calculation and comparison of various financial indicators, such as rate of return, price-earnings ratio, price-to-book ratio, return on assets, etc., as well as forecasting through financial models, such as cash flow forecasts, stock valuation models, etc. Quantitative analysis uses various financial values to conduct quantitative analysis on a company, and measures the company's investment value through the calculation of various financial ratios. Here are some common quantitative analysis contents: Financial analysis: including analysis of financial statements such as income statement, balance sheet and cash flow statement, as well as calculation and comparison of various financial indicators, such as rate of return, price-earnings ratio, price-to-book ratio, return on assets, etc. Profitability analysis: Evaluate the company's profitability, including analysis and comparison of gross profit margin, net profit margin, revenue growth rate and other indicators. Financial stability analysis: Evaluate the company's financial stability, including analysis and comparison of debt ratios, current ratios, cash ratios and other indicators. Financial leverage analysis: Evaluate the company's financial leverage, including analysis and comparison of financial leverage ratio, return on equity and other indicators. Industry comparative analysis: Compare a company's financial indicators with other companies in the same industry to understand the company's performance and competitiveness in the industry. Stock valuation model: Analyze and predict the company's financial data and market data through mathematical and statistical models, such as cash flow forecasts, stock valuation models, etc. Through quantitative analysis, a company's intrinsic value and future development potential can be assessed more objectively and accurately. At the same time, quantitative analysis can also help investors understand the potential risks and uncertainties of companies and industries to make more accurate investment decisions. How to use TradeUP for fundamental analysis? You can perform fundamental analysis using the TradeUP web version or the TradeUP App. Here we take the TradeUP mobile App as an example to introduce it. Note: In the explanation, we use Apple stock AAPL as an example. This stock is only used as an example and is not intended to guide you to buy the stock. Remember: There are risks in the stock market and investment needs to be cautious. TradeUP provides a specialized [Fundamental Analysis]. By clicking [Analysis] at the top, you can find [Fundamental Analysis]. Through visual graphics, you can most intuitively understand the strength of various aspects of a listed company, including profitability, cash flow capabilities, growth capabilities, solvency, and the company's operating capabilities. In addition to the company's fundamental information provided in the [Fundamental Analysis] section, you can also use [Valuation Analysis] under the [Analysis] option to intuitively understand the company's price-to-earnings ratio (P/E), price-to-sales ratio (P/S), and price-to-book ratio (P/B) through images. Through the colored graph in the figure below, you can intuitively understand the range of the current stock price. The red area represents the area where the company's stock price is overvalued, the yellow area indicates the reasonable price range, and the green area indicates the area where the company's stock price is undervalued. For each listed company, TradeUP also provides detailed financial status information, such as earnings per share (EPS), return on assets (ROA), return on equity (ROE), quick ratio (Quick Ratio) and other important profit-related parameters, as well as relevant information on the balance sheet and cash flow statement.
Click the menu option [Finance], and you can view the relevant financial data on the income statement, balance sheet, and cash flow statement, as well as important financial indicators calculated from these financial data. The following is the important financial data obtained from the income statement: You can also view earnings per share, U.S. stock net assets, current ratio, quick ratio, return on equity, return on assets, gross profit margin, and net profit margin. Click the arrow on the left below to view more profit-related data. Regarding the company's assets and liabilities, you can view them in the TradeUP App, as shown below: In addition to the financial information of the income statement and balance sheet, you can still view relevant information of the cash flow statement. At the same time, under the [Finance] option, you can quickly view the company's main products and the main sales regions of the products. Finally, you can check news related to listed companies, understand the development trends of the company and industry, and at the same time, you can track the latest moves of other investors. What is the difference between fundamental analysis and technical analysis? Fundamental Analysis and Technical Analysis are both methods of investment analysis, but their analysis objects and analysis methods are different. The specific differences and connections are as follows: The objects of analysis are different: fundamental analysis mainly focuses on fundamental factors such as the company's financial and operating conditions, industry and macroeconomic factors, in order to evaluate the company's intrinsic value and investment potential; while technical analysis mainly focuses on the trend changes of technical indicators such as market prices and trading volumes, in order to study market behavior. The analysis methods are different: fundamental analysis mainly uses financial statement analysis, macroeconomic analysis, industry analysis and other methods to evaluate the company's intrinsic value and future development potential; while technical analysis mainly uses chart analysis of stock prices and trading volumes to find price trends and predict price trends. The analysis time is different: fundamental analysis is usually a long-term, future-oriented analysis method that focuses on analyzing the company's financial situation and future development potential; while technical analysis is usually a short-term, current market-oriented analysis method that focuses on analyzing the market's price movements and trends. Fundamental analysis and technical analysis have a complementary relationship in investment analysis. Fundamental analysis can help investors evaluate a company's intrinsic value and future development potential, while technical analysis can help investors better grasp market price trends and buying and selling opportunities. Therefore, in actual investment, investors can combine fundamental analysis and technical analysis to formulate a more comprehensive investment strategy. Fundamental AnalysisFundamental AnalysisTechnical Analysis Analyze content Micro company data to macroeconomic environment The company's short-term trend chart Purpose of use Determine the company's investment value by analyzing various factors that may affect the company's development, and help determine investment opportunities Use short-term charts to analyze stock price trends and determine investment opportunities Factors affecting assessment results Various objective factors including company operations and national economic environment Mainly driven by market investment psychology Applicable objects Suitable for both long-term and short-term investors More suitable for short-term investors. More investment basics What is the required rate of return? Required Rate of Return What is the CFTC? CFTC What are Credit Default Swaps? Credit Default Swaps What is a "petrodollar"? Petrodollar What is technical analysis? Technical Analysis What is a short trade? Short Selling Year-on-year vs month-on-month? MoM, QoQ, YoY How to obtain the holdings of financial institutions? How to find Form 13F? What are mortgage-backed bonds? Mortgage-Backed Security